By Jacob Ideskog, CTO at Curity
The financial sector has been transformed by the innovation and new technologies brought about by Open Banking. Consumers now have the ability to have a very different relationship with their bank than they did 5 or 10 years ago, with access to a range of personalised financial services.
There is undeniably considerable momentum behind the concept of Open Finance across a wide range of financial institutions, which will see its adoption amongst both businesses and consumers increase over the coming years. Currently, there are 5 million people in the UK now using Open Banking according to the OBIE, and Curity’s research report Facilitating the Future of Open Finance reveals 1 in 4 financial service organisations have adopted Open Banking services and 70% have plans to do so in the next 18 months.
However, that is not to say that Open Banking and adoption of Open Finance does not face obstacles. If consumers and businesses are to realise the true potential and full benefits of Open Banking, it is vital that important challenges such as security concerns, consumer understanding and continued investment into these services are addressed.
Over 70% of organisations globally are concerned with security related issues associated with Open Banking. As the adoption of Open Banking continues to accelerate, understanding and mitigating risks is becoming increasingly important and plays a key role in Open Banking’s long term future.
A key concern amongst businesses is the extensive involvement of third-party providers that facilitating Open Finance requires and the heightened security risks associated with this. Over 65% of organisations view this as a top security concern and 62% of organisations have concerns with outdated security systems that don’t securely support the sharing of data. Additionally, consumers attribute their hesitancy towards Open Banking to the sharing of ‘sensitive’ and personal data with third party financial institutions (FIs).
Businesses need reliable systems in place to manage the data sharing process, to introduce new applications and services that require a robust technology support system. Without these systems businesses risk falling behind their more advanced counterparts, and will lose customers who can find better experiences elsewhere.
Open Banking is heavily regulated in many regions of the world and requires financial-grade security protocols to be in place to protect user data and information. OAuth 2.0 and OpenID Connect, while sometimes considered complex, support businesses by offering robust security frameworks that deliver secure services that protect customers. By implementing financial-grade security, businesses can be confident that the systems they are building are appropriate for their consumer audience.
Achieving mass adoption through education
Consumers are showing hesitancy when it comes to their understanding of Open Banking and how it can help them, with recent research revealing nearly half of consumers are scared of Open Banking. FIs have a crucial role to play in overcoming this challenge and improving consumer understanding. Importantly, this also provides FIs with a fantastic opportunity to develop improved customer relations and build greater trust, by demonstrating their commitment to offer an improved customer experience.
Encouragingly, 96% of organisations globally believe consumer adoption is crucial to the future of Open Banking but now is the time for FIs to act. Consumers must understand why their data is being used, and how it can help them. Without consumer understanding, Open Finance would be a business-only technology and without consumer knowledge and buy-in, the purpose of Open Banking is null and void.
Why continued investment is key to maintaining momentum
Investment will play a crucial role in three areas that will help to drive and consolidate adoption of Open Banking. Firstly, it will aid the introduction of new technology solutions, as well as allow for the training of new staff and hiring of specifically skilled staff such as Open Banking deployment specialists.
Investment in education and training will be critical for success. Businesses must foster a culture within that not only fully understands but embraces Open Finance. Additionally, this will also be extremely beneficial to improving consumer understanding, by enabling staff to pass on their knowledge and understanding to customers and further drive consumer adoption.
Another key aspect of continued investment is its ability to allay fears amongst consumers around security. Upskilling staff, updating security systems and introducing new technologies will provide consumers with peace of mind about data handling and data storage and remove a key barrier to wider adoption.
Open Finance has made a significant impact on the financial sector and still has huge potential to continue to be a transformative force. But this will not happen by itself, the same zeal and enthusiasm that drove its initial growth is required from FIs, cybersecurity professionals and businesses if we are to realise the true potential of Open Finance.